How to think about France

About once a year Paul Krugman does a post discussing the difference between the US and French economies.  Here is Krugman in 2011:

So, here are some [2008] ratios of France to the United States:

GDP per capita: 0.731

GDP per hour worked: 0.988

Employment as a share of population: 0.837

Hours per worker: 0.884

So French workers are roughly as productive as US workers. But fewer Frenchmen and women are working, and when they work, they work fewer hours.

Why are fewer Frenchmen working? As I’ve pointed out, during prime working years they’re as likely to work as Americans. But fewer young people work (in part because of more generous college aid); and, mainly, the French retire earlier. The latter is arguably the result of misguided policies: Mitterand made early retirement alarmingly attractive. But it’s not a problem of weak productivity or mass unemployment.

And why do the French work shorter hours? Probably for the most part because of government policies mandating vacation time.

The bottom line is that France is a society with the same level of technology and productivity as the US, but one that has made different choices about retirement and leisure. Vive la difference!

I’m an academic like Krugman, and not surprisingly I also prefer more leisure time to more GDP.  But one “difference” Krugman does not mention is unemployment, which has generally been higher in France than the US over the past 30 years, often by a wide margin (and hence it’s not just the euro problem.)

A few months ago Krugman noticed that France isn’t just poorer than the US, it’s also growing more slowly.  That made him slightly less optimistic about France (as compared to the Ostry et al paper he discusses in this post):

Once you delve into this low labor input, it starts to look like the result of some very specific policies rather than redistribution in general: a pension system that encourages early retirement, regulations that give the French shorter hours and much more vacation time than we get.

Overall, I am still mostly persuaded by the Ostry et al work, but I think we need to acknowledge that it’s not quite as slam-dunky as liberals might like.

And now he has a new post emphasizing the fact that France actually has a higher employment rate than the US among prime age workers (25 to 54.)  He seems to think that undercuts supply–side position that Europe is depressed due to high taxes and benefits:

The truth is that European-style welfare states have proved more resilient, more successful at job creation, than is allowed for in America’s prevailing economic philosophy.

I mostly agree with Krugman on the facts, but I see them as strongly confirming the Prescott/Mulligan view of the world.  Perhaps there’s a framing affect problem here, as Prescott once compared France to Depression-era America, mostly on the basis of the very low level of hours worked.  But let’s get past that misleading analogy, and think about what the supply-side model actual predicts.  Keep in mind that France has a wide range of policies that reduce aggregate supply:

1.  High taxes and benefits, which create high MTRs.

2.  High minimum wages and restrictions on firing workers.

What should we expect from these “bad” supply-side policies?  I’d say we should expect less work effort at almost every single margin.  Earlier retirements, more students staying longer in college, longer vacations, and a higher unemployment rate.  And that’s exactly what we see.  We might also expect lower productivity.  After all, those high tax rates should discourage capital formation, which would result in lower productivity.  And yet the figures Krugman cites suggest that productivity is only 1.2% lower than in the US.  That doesn’t seem so bad.

But here’s what Krugman misses.  His other argument, that prime age employment in France is pretty high, strongly suggests that the productivity numbers are distorted by composition bias.  Think about the people who are not employed in France, but who would be employed in America.  The rate of employment among French immigrants from North Africa is presumably lower than among Latino immigrants in the US (which seems like the most comparable ethnic group.)  The young in France are less like to work, as are the elderly.  Given that French employment is much more heavily concentrated in prime age workers, I’d expect higher hourly productivity in France.  I wonder how productivity varies controlling for age and ethnicity?

That’s not to say the supply-side model explains everything.  I’m not sure why the rate of employment for prime age workers is lower in the US than France, but I’d guess it reflects the fact that the French model does have some advantages over the US model.  Just off the top of my head I could imagine these might include a better K-12 system, less incarceration for drug “crimes,” fewer people on disability, etc.

But overall France conforms to the predictions of supply-side economics.  The French are smart enough and efficient enough to spread the cost of not working far more effectively than did the US in the 1930s.  The psychic pain of being unemployed is much less if you are a young person in school, or someone who retires early, or are spending the month of August in Provence.  But their regime is not cost-free.  They do have much higher unemployment, and that does impose psychic costs.  Liberals constantly remind us (correctly) that unemployment is a devastating problem. And their per capita GDP is only 73% of US levels (in 2008, surely even less today.)  And that percentage is gradually declining.  Migrants from China and India tend to prefer the US model.  So while I think France has a lot of good qualities such as top-notch infrastructure, and indeed arguably has close to the highest quality of life in the world, there is always room for improvement.  And the labor market is one area where France falls short, just as the supply-side model predicts.  Even modest reforms (say along German lines, not American lines) would deliver important gains.  Instead, Germany is moving in France’s direction.

And finally, I don’t think it makes much sense to compare a medium size homogenous country like France to a large heterogeneous country like the US.  Krugman has another post pointing out that the European welfare state model doesn’t work as well in Italy.  His post is entitled “What’s the Matter with Italy?” and ends with the following:

I’m not going to answer this; truly, I don’t know. But it’s important.

He’s addressing the terrible Italian productivity numbers since 2000.  I also don’t know why Italy has declined so sharply in recent years.  But there is one thing we do know about Italy, the low level of per capita GDP (compared to France) is almost entirely due to an absolutely horrendous performance in southern Italy, where roughly 1/3 of all Italians live.  And there is a lot of circumstantial evidence that at least part of the difference between southern and northern Italy is cultural.  Not “cultural” in the sense that some people use the term (a code word for lazy.)  After all, southern Italians do quite well in America.  Rather cultural in the sense that everyone’s hobbled by a culture of corruption than no single Sicilian or Neapolitan is in a position to change.

So I don’t believe you can think about France vs. the US without also thinking about southern Italy.  That’s part of the rich mosaic that is the Welfare States of Europe (the WSE), just as South Dakota Indian reservations, and McAllen Texas, and rural Mississippi are part of the United States of America (USA), the world’s richest big economy.  It would probably make more sense to compare France to an above average region of the US, such as New England or the mid-Atlantic states.  In that case the problem with the French labor market model would be easier to see.  The problem is not that the French model has “failed,” as some conservatives suggest.  The problem is that France has not achieved Swiss or New Hampshire levels of success, despite having the human capital and cultural traditions needed to do so.  They should aim even higher.

HT:  Edward

PS.  In 2012 the World Bank has French GDP/person (PPP) at 71.1% of US levels.  In 2013 the IMF has French GDP per capita at 67.4%, while the CIA has 67.6%.  I suppose you could argue the drop since 2008 is cyclical, except no one is predicting French GDP/person to rise faster than US GDP/person over the next few years.  It looks permanent to me.

As a point of comparison, African American housholds make 65.3% of the US average, and Hispanics make 76.5% of the average.  Is that comparison misleading?  That’s an understatement; it’s utterly and completely misleading.  Apples and oranges.  I simply provide the data for all the fools who think income data tells us something useful about issues like economic inequality.

PPS.  I just noticed that Tyler Cowen has an excellent post on this topic.

Define “damaging”

Here is the Financial Times:

Although economic growth has disappointed, the new Federal Reserve chairwoman has successfully persuaded markets that official rates will remain “low for longer”. Unsurprisingly, the dollar has weakened over the past year.

Her munificence is not totally appreciated across the Atlantic. What is seen in the US as a proactive attempt to stimulate a still-weak economy is an additional complication at the European Central Bank. The result could be a damaging competition between the advanced world’s central banks to weaken currencies and stimulate economies.

Obviously I don’t think this sort of competition would be damaging.  But the title of this post is sincere, not sarcastic.  I honestly don’t know what sort of damage the FT has in mind.   I wish they had told us.

PS.  The article also suggests that some believe Yellen’s policies are hurting Europe.  That claim does make me want to be sarcastic.  I guess they didn’t notice how European stocks react to American monetary stimulus.

HT:  Stephen Kirchner 

Education and marriage

How do marriage and education relate to successful societies?

Recently I’ve been toying with some ideas that seem contrarian, but perhaps that merely reflects my ignorance of the literature.  Marriage and education are highly correlated with positive life outcomes, in many dimensions.  Many people believe the causation runs from marriage and education to better life outcomes.  Some believe that policies that improve education and encourage higher marriage rates will lead to better societies.  This is where I become a bit skeptical.

Steve Waldman has a post that does an excellent job of explaining why encouraging more people to marry is a bad idea, especially where their marriage options are far from optimal.  Perhaps economic success causes higher marriage rates. Ross Douthat has a long commentary on the Waldman piece, which is equally brilliant.  When I read those two I’m sort of like the pillow that has the impression left by the last person who sat on it.

Here I’d like to make a Waldman-type argument for education.  I’m not wedded to this hypothesis (and I also have an open mind on the utility of marriage) but I think it’s at least worth considering.  The argument I’d like to make is that good educational systems don’t cause good societies; rather good societies cause good educational systems.  I’m going to cheat a bit in my definition of “good societies,” both by leaving it vague and allowing that it might to some extent apply to a poor place like South Korea circa 1970.  In other words societal quality is related to many variables beyond income, including social cohesion, low levels of violence, lack of tribalism, liberal attitudes in the broadest sense of the word (such as empowering women and allowing dissent), etc.

Why are so many intellectuals attracted to the idea that better education can help solve society’s problems?  Partly because they are intellectuals.  Partly because at the individual level better educated people do better on average, in many respects.  Partly because the idea appeals to both liberals and conservatives.  They might disagree about precisely how the educational system should be improved, but can at least agree that an improvement would significantly improve society.

Here are a few reasons why I am skeptical:

1.  I’ve never met anyone who’s life outcome seemed strongly linked to the quality of their schooling, particularly the parts of education that get all the attention (quality of structures, teachers, curriculum, etc.)  I’ve known people who dropped out of high school, or chose not to go to college when they could have, but in no case was their decision in any way related to a dysfunctional school system.  Nor have I ever participated in a discussion of another person not present (i.e. gossip) that attributed that person’s failings to the schools they went to.  It’s always personal qualities, or a tough home environment. I can imagine that there might be cases where education was to blame, but typically those cases are associated with attending schools with a climate of fear, a lack of respect for learning, and a non-supportive home environment.  I.e., things that are not easily reformed through public policy.  FWIW, one reason I support vouchers is that I believe that private schools would be less likely to be dominated by a climate of fear.  So I’m not saying policy has no effect.

2.  Bryan Caplan recently discussed some studies that show how efforts to improve education in poor countries often produce disappointing results.  Students often attend schools for many years, and still have weak academic skills.  This obviously fits in with my hypothesis.  In my view the educational failures of countries like Afghanistan and Haiti are more likely to reflect the dysfunction of society than a lack of spending on schooling.

At one level my message seems pessimistic, not much can be done in backward areas.  But you can also interpret my hypothesis in a much more positive way.  If “success” can be brought to those rural villages then they will start improving their educational systems.  What do I mean by “success”?  Among other things I mean more income and more liberal attitudes.  Global media outlets can help instill more liberal attitudes, and better economic policies can help bring more income.  India and China are examples of the latter. When society becomes more liberal and richer, it will choose to offer better education (and better health care and other social services.)

Is there any evidence in favor of my hypothesis?  You would want to find some places with “good institutions” in general, but which for some quirky historical reason abandoned good schools and marriage.  If I’m right, those places should still be highly successful.  After all, I’m claiming that success leads to good schools and successful families, not vice versa.  An implication is that if some quirky historical factor blocks the normal “success –> marriage/education” outcome, then the success will still be there.  So where is this contrarian utopia?

Utopia means nowhere, but it seems to me that Sweden comes close.  I’m told that the “hippie generation” ruined Sweden’s school system with very lax policies.  I’m not sure if that’s true, but they do score relatively low on international rankings, far below neighboring Finland.  Yet Sweden is one of the richest countries in Europe, indeed richer than Finland.

Sweden also has fairly low marriage rates.  The counterargument is that many Swedes have stable partnerships without being married.  But I see that as supporting my point.  In a successful society you can remove an institution that Douthat believes is essential, and still achieve success.

To be sure, Sweden’s schools are still light years ahead of those in Afghanistan and Haiti, and you do need a certain amount of education to have a successful society.  But as I observe my daughter go through the 9th grade in a highly rated public high school, I am struck by how much of what she learns will have no useful role to play in her future career.  Some of the math homework is geometric problems that even engineers would rarely see, or endlessly solving various arcane algebraic relationships.  A skill that would never even be used in most technical fields, but will help on SATs.  There is lots of stuff on things like agricultural techniques in the Middle Ages.  I’m not trying to be critical, it’s great that they are already studying concepts like Acemoglu’s extractive/inclusive distinction in the 9th grade.  I’m an intellectual too.  My only point is that a society can be full of reasonably happy productive people even if they only learn 1/2 of what my daughter learns (please no one tell her.)  Sweden has happy productive people with a school system far inferior to that of Finland.

It seems to me that a mediocre school might make it harder to become a doctor or lawyer.  But are there actually people who didn’t learn enough to find middle income jobs like electrician, nurse, cop, plumber, etc., simply because the schools weren’t good enough?  Or was the actual problem that they didn’t study hard enough? (Perhaps due to a nightmarish home/neighborhood environment—I’m not interested in blaming the victim here.)  If I’m right, how will fixing our schools solve poverty?

Are there arguments in the other direction?  I recall there is a Heckman study showing that having good teachers when young can produce lifelong benefits.  I’d be interested in hearing other views.  I’m not wedded to my skeptical views of marriage and education.  I’ve been married for 20 years and am a teacher.  

PS.  Being a contrarian I was attracted to the idea of doing this post partly because the marriage skepticism puts me on the liberal side, whereas my views on education seem slightly at odds with a popular liberal solution to society’s problems.

PPS.  I also wonder if China is an example of my hypothesis.  At least until recently, they spent relatively little on education.  It seems to me that China’s economic growth is causing education to improve, more than the reverse.

PPPS.  One problem with the otherwise excellent Waldman post is that he describes an America split between the rich and poor.  I doubt this is true; the vast majority of Americans are probably in the middle.  At least if you accept the assumption that income is the right way to measure inequality.  I don’t, so I’m still willing to consider the two societies hypothesis.  But where is the evidence?

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From The Economist

Every once and a while I like to talk about interesting articles in my favorite magazine.  Here is the Economist summing up the mood of Indian voters before the recent election:

The mood of Kamalpur’s residents is revealing. As they are mostly Muslims, Congress hopes for their votes. Yet the party’s main message interests nobody. No one speaks in favour of public welfare, subsidised rice and wheat or efforts to provide make-work jobs, policies supposed to give Congress the support of the rural poor. “A programme is good if it reaches here, but it doesn’t come,” says one man, sparking a lively chat about crooked politicians. A good road to the city helps more.

By contrast, the BJP is fired up. Middle-caste Hindus whose lives are fast improving dominate nearby villages. Those who have grumbled eternally about bad rains can now moan instead about traffic jams into Delhi. Signs of their new wealth are abundant. Walk down narrow alleys and men crowd around to film you using their tablets and phones. “It is very fine here,” says one. “We are connected.”

These voters back the BJP and predict rapid economic gains after the election. They are impatient for a better life, having tasted the optimism that faster expansion brought in the 2000s. Frustrated since then by slower growth (stuck at 5%) and high prices, they want Congress crushed.

A watershed in three parts

This election is likely to be seminal. A campaign strategist for a big party talks of “citizen consumers” who are intolerant of substandard politicians and readier than ever to dump them. These more demanding voters are emerging thanks to three intertwined trends: a youth bulge, urbanisation and rising incomes. In time, they should help to improve the political system.

The rise of the young is dramatic. Around half of India’s 1.2 billion people are under 26, with no memories from before the first liberalising reforms of 1991 but aware that development still lags. These “born frees” are the vanguard of a huge number who will come of age in the next two decades.

Consider Congress crushed.  Morgan Warstler must be smiling somewhere. Just to be clear, I don’t know enough about Indian politics to comment on who “should have won”, although I’m certainly aware of the controversy surrounding Mr. Modi. (As an analogy, my views on Abenomics are unrelated to my views on Mr. Abe. And doesn’t the Indian election look an awful lot like the 2012 Japanese election? A controversial nationalist wins an overwhelming victory promising market reforms in a country where growth is slow and elections usually produce weak coalition governments.)

I’m more interested in the mood of the voters.  India has more people that the US, Canada, Japan, Australia and Europe combined.  Poverty is the big problem.  And if we can believe The Economist, they just voted for growth over redistribution. That fact (not the election of BJP) makes me more optimistic.

You hear lots of conservatives say that they are more worried about poverty than “inequality,” partly in response to the recent focus on the huge gains that have gone to the top .01%.  (Here’s an example from Martin Feldstein.)  I do think that inequality is a valid issue, and support some redistribution on utilitarian grounds, but I share the conservative dismay over the recent obsessive focus on billionaires.  It seems disproportionate in a world where the most serious problems are poverty and too little capital, not too many wealthy people.  Once again the Economist, this time discussing North Korea:

“Dear Leader”, which includes three personal poems, is a testament to Mr Jang’s literary flair. He chooses poetry to express painful episodes, whether the hunger of a young girl or the public execution of a farmer in his home town. He paints a bleak portrait of his village, to which he briefly returns to discover a swarm of wasted bodies “waiting for death”, a childhood friend eating rice by the grain and tap water for sale. Desolation creeps even into better-off Pyongyang: a mother, close to death, and her daughter stand in a marketplace; a sign hangs from the girl’s neck: “I sell my daughter for 100 won ($0.11)”.

I’ve been reading the Economist for 40 years, and it’s greatly influenced my worldview.  It’s made me see the entire world as “us.”  It’s convinced me that progress is 90% growth and 10% redistribution.   Of course 10% is still quite important in absolute terms.  But even that issue is quite complex.  Suppose Bill Gates’ entire fortune was transferred to the US Treasury.  How would that impact US equality?  How about global equality?  Those two questions might have very different answers.  Again, focus on consumption, not wealth.

Here the Economist explains how Germany is starting to undo the very reforms that made its labor market so successful:

During her previous grand coalition Mrs Merkel made one big domestic reform. In Europe’s fastest-ageing country, she raised the retirement age from 65 to 67. Sadly, there is less method in the seeming madness of the present coalition’s opening salvo of policies—what Germans are calling Reförmchen, or reformlets”. One of these again affects pensions, but in the opposite direction, lowering the retirement age for certain workers to 63, and perhaps even to 61 if years in unemployment are counted. Economists and employers are screaming foul. So are 50 of the 311 parliamentarians from Mrs Merkel’s own centre-right camp, who fear the economy will suffer.

Another Reförmchen is to introduce a national minimum wage for the first time, of €8.50 ($11.72). This will affect about 14% of workers nationwide and 20% in the less productive former East Germany, according to a study by three economists at universities in Magdeburg, Berlin and Dresden. When Britain introduced a minimum wage in 1999, it affected only 5% of workers. Germany’s wage floor would barely increase incomes of poor workers, because they would lose welfare top-ups, the study says. But it could mean that as many as 900,000 lose their jobs. And it could stop young people (over 18 but under 21) getting good training and permanent jobs at all.

.  .  .

The government has also intervened messily in the property market, where rents are rising fast in some cities. It will cap increases in rent when re-letting flats to at most 10% of the rental average in the relevant district. The rules are still vague. But that hasn’t stopped landlords from panicking and raising rents as high as they can in anticipation. Investors who were planning to build new housing are thinking again.

That’s what happens when you give the conservative party a big victory.  And it reminds us not to expect too much from Mr. Modi.

The Economist is also one of the few magazines that understands the important role that deposit insurance plays in creating moral hazard and excess risk-taking:

EVER since Lehman Brothers went bankrupt in 2008 a common assumption has been that the crisis happened because the state surrendered control of finance to the market. The answer, it follows, must be more rules. The latest target is American housing, the source of the dodgy loans that brought down Lehman. Plans are afoot to set up a permanent public backstop to mortgage markets (see article), with the government insuring 90% of losses in a crisis. Which might be comforting, except for two things. First, it is hard to see how entrenching state support will prevent excessive risk-taking. And, second, whatever was wrong with the American housing market, it was not lack of government: far from a free market, it was one of the most regulated industries in the world, funded by taxpayer subsidies and with lending decisions taken by the state.

.  .  .

The numbers would amaze Bagehot. In America a citizen can now deposit up to $250,000 in any bank blindly, because that sum is insured by a government scheme: what incentive is there to check that the bank is any good? Most countries still encourage firms and individuals to borrow by allowing them to deduct interest payments against tax. The mortgage-interest subsidy in America is worth over $100 billion.

Even Bagehot’s own financial long-stop has been perverted into a subsidy. Since investors know governments will usually bail out big financial firms, they let them borrow at lower rates than other businesses. America’s mortgage giants, Fannie Mae and Freddie Mac, used a $120 billion funding subsidy to line shareholders’ pockets for decades. The overall subsidy for banks is worth up to $110 billion in Britain and Japan, and $300 billion in the euro area, according to the IMF. At a total of $630 billion in the rich world, the distortion is bigger than Sweden’s GDP—and more than the net profits of the 1,000 biggest banks.

.  .  .

How can the zombie-like shuffle of the state into finance be stopped? Deposit insurance should be gradually trimmed until it protects no more than a year’s pay, around $50,000 in America. That is plenty to keep the payments system intact. Bank bosses might start advertising their capital ratios, as happened before deposit insurance was introduced. Giving firms tax relief on financing costs is sensible, but loading it all onto debt rather than equity is not. And still more can be done to punish investors, not taxpayers, for failure.

The Economist has a long history, and willingness to learn from its mistakes.  Here it corrects a mistake made in 1857:

As well as being global, the crash of 1857 marked another first: the recognition that financial safety nets can create excessive risk-taking. The discount houses had acted in a risky way, holding few liquid assets and small capital buffers in part because they knew they could always borrow from the Bank of England. Unhappy with this, the Bank changed its policies in 1858. Discount houses could no longer borrow on a whim. They would have to self-insure, keeping their own cash reserves, rather than relying on the central bank as a backstop. That step made the 1857 crisis an all-too-rare example of the state attempting to dial back its support. It also shows how unpopular cutting subsidies can be.

The Bank of England was seen to be “obsessed” by the way discount houses relied on it, and to have rushed into its reforms. The Economist thought its tougher lending policy unprincipled: we argued that decisions should be made on a case-by-case basis, rather than applying blanket bans. Others thought the central bank lacked credibility, as it would never allow a big discount house to fail. They were wrong. In 1866 Overend & Gurney, by then a huge lender, needed emergency cash. The Bank of England refused to rescue it, wiping out its shareholders. Britain then enjoyed 50 years of financial calm, a fact that some historians reckon was due to the prudence of a banking sector stripped of moral hazard.

And here is one reason I am a market monetarist:

Argentines themselves must also change. The Kirchners’ redistributive policies have helped the poor, but goodies such as energy subsidies have been doled out to people who do not really need them. Persuading the population to embrace the concept of necessary pain will be difficult. That is partly because the experience of the 1990s discredited liberal reforms in the eyes of many Argentines. But it is also because reform requires them to confront their own unprecedented decline. No other country came so close to joining the rich world, only to slip back. Understanding why is the first step to a better future.

The neoliberal reforms worked fine until 1998, when monetary policy became much tighter.  No wonder it’s so hard for Argentine voters to develop an “understanding” of what went wrong.  The group that delivered the free market reforms is the same group that delivered the hard money policies that drove Argentina into deflation and depression.

The entire article on Argentina’s long, sad decline is worth reading.  The accompanying photo reminded me of The Purple Land, a novel you don’t hear much about anymore.

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Is economics getting more liberal?

Here’s Noah Smith in Quartz:

As an econ blogger, I get the sense that this is exactly how many Americans still think of economists—as self-appointed defenders of the free market, spinning theories to show that greed is good. Watching those old Milton Friedman videos, I wonder if that picture might have been accurate in the 1960s and 1970s. But some big things have changed in the field of economics, and America should know about them. Three big changes stand out in particular: Econ today is more data-driven, far less politically conservative, and in general much more like engineering than it used to be.

I think it’s much more complicated.  Economics was very liberal in the 1960s and 1970s.  When I studied at Wisconsin (1973-77), Milton Friedman was viewed as a crackpot.  So Smith is actually 180 degrees off in terms of the 1960s and 1970s. Then after the mid-1970s the profession started moving to the right, becoming much more conservative in the 1990s.  Policy also moved in that direction.  Since 2007 economics has moved sharply to the left, and indeed was already moving a bit in that direction before 2007.

I don’t see much evidence that economics is more data-driven.  Then and now you have policy pundits (Friedman, Krugman, etc) and lots of ordinary economists doing empirical and theoretical studies.  Here’s one example of my skepticism.  If we really were becoming more like engineering, why is it that in 2008 lots of top macroeconomists didn’t seem to be able to offer any useful policy advice.  Their models seemed unable to handle the biggest fall in nominal spending since the 1930s.

And let’s say I’m wrong about Paul Krugman, and that Krugman actually had good advice on fiscal stimulus.  As far as I can tell Krugman was relying on 1960s IS-LM models, not modern “engineering-type” DSGE academic studies.  Is that wrong?

PS.  After I wrote this I saw a similar post by David Henderson.  I almost refrained from piling on, but then I realized that it was Noah Smith.

PPS.  I see the Swiss voted 3 to 1 against instituting a minimum wage law.  I guess we can anticipate huge shantytowns on the outskirts of Zurich and Geneva, as the low paid Swiss workers struggle to survive in their squalid slums.  The voters also rejected the military’s request for more jet fighters.  Two good decisions.  I wish Americans could vote on projects that even the military says are not necessary, but are funded because a few Congressmen need jobs in their districts.

Swiss unemployment is 3.2%.